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BMW is the first overseas car maker to get a potential toehold in Chinese electric-car battery maker Contemporary Amperex Technology Co Ltd (CATL), obtaining the right to make an equity investment of as much as 2.85 billion yuan (Dh1.56bn).

BMW Brilliance, the German car maker’s Chinese joint venture, is entitled to invest in CATL if the company plans to sell shares in China or abroad, according to a statement from the battery maker Tuesday. At CATL’s current stock price, the right would give BMW a stake of less than 2 per cent of the company.

With the demand for electric vehicles projected to surge, competition among car makers to forge ties with battery suppliers is heating up. CATL, which said it shipped more batteries last year than any competitor, struck joint ventures or received minority equity investments from Chinese auto makers including Dongfeng Motor Group, SAIC Motor and Chongqing Changan Automobile before its initial public offering last month.

BMW Brilliance will also prepay 2.85bn yuan as part of a long-term contract to buy batteries from CATL. It’s also purchasing a 815 million yuan battery-production project from the supplier to make designated products, according to the statement.

BMW said this month it will source about $4.7bn worth of battery cells from CATL, providing a building block for the Chinese producer’s plan to establish a manufacturing site in Germany. BMW representatives in Munich didn’t immediately respond to a request for comment about a potential stake in CATL.